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There is typically very little difference in efficiency between income and consumption taxes, and it takes quite a long time for the slight advantage of consumption taxes to become measureable. This of course is without regard to the quality of any particular income or consumption tax. It is simply the general case.
It's more efficient because it reduces consumption without hurting the economy.
That's a highly questionable conclusion to draw from the article. The four years worth of data studied are not only the first four years in which BC's carbon tax was in effect, but also the first four years in which the Great Recession was in effect. Use of fossil fuels dropped virtually everywhere during the recession. Carbon taxes that are revenue neutral (i.e., offset by reductions in other taxes) are something that interests many competent analysts though, so it will be interesting to see what the data look like once there is more of it.
If you look closely at the data, they accounted for the recession in their analysis. It makes sense though. Raising the price of an item reduces consumption of that item.
Ah, but you are forgetting about overcoming the null-hypothesis.
Whether we are doing it or not is immaterial to the fact the world has warmed over the past couple 100 years. To assess the economic impacts, we first have to figure exactly what a warmer world means in terms of economic impacts. Secondly, do these impacts outweigh the benefits?
I see one benefit so far, and that is governments (such as in British Columbia) are increasing consumption taxes while decreasing the less efficient income taxes.
Projecting the economic value of the global damages due to climate change is far from an easy task. Existing estimates are based on highly aggregated Integrated Assessment Models (IAMs), which have very crude damage functions in them based on very little data. Estimates probably get better at the country level and better still at the country-sector level, especially in developed countries. However at these scales (country, sector), another problem pops up, which is how to project the effects of reductions in global greenhouse gas stocks, due to reduced emissions, on local climates. Once you cross these hurdles, one can presumably estimate the value of the avoided damages for a country or an in-country sector.
Estimating the benefits of adaptation actions is a bit easier, since you aren't changing the climate when you adapt to climate change, you are just adjusting, locally, to the change in climate in an economically efficient manner, be it from a private (market) or social perspective. All of the avoided damages (benefits) are local, not global. By contrast, if you reduce emissions from a local source, it's physical effect on emissions is global; however, the local damages still depend on the local components of the resulting climate change.
If you look closely at the data, they accounted for the recession in their analysis. It makes sense though. Raising the price of an item reduces consumption of that item.
The problem is that the own price elasticity of demand for energy is generally pretty inelastic: you can impose a 10% consumption tax, say, and energy consumption drops by far less than 10%. This is why governments love to tax energy consumption: they get a lot of revenue for their general funds, although the consumption of energy does not decrease by much.
The problem is that the own price elasticity of demand for energy is generally pretty inelastic: you can impose a 10% consumption tax, say, and energy consumption drops by far less than 10%. This is why governments love to tax energy consumption: they get a lot of revenue for their general funds, although the consumption of energy does not decrease by much.
If you look closely at the data, they accounted for the recession in their analysis.
I didn't see that anywhere.
Quote:
Originally Posted by Glacierx
It makes sense though. Raising the price of an item reduces consumption of that item.
That's a general rule, but not an iron-clad one. Elasticities may be expected to vary over different time frames and across different regions of a demand curve.
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